Import Administration, International Trade Administration, Department of Commerce.
In response to a request from Seaman Paper Company of Massachusetts, Inc. (the petitioner), the Department of Commerce (the Department) is initiating an anti-circumvention inquiry to determine whether certain imports of tissue paper from Thailand are circumventing the antidumping duty order on certain tissue paper products (tissue paper) from the People's Republic of China (PRC). See Notice of Amended Final Determination of Sales at Less than Fair Value and Antidumping Duty Order: Certain Tissue Paper Products from the People's Republic of China, 70 FR 16223 (March 30, 2005) (Tissue Paper Order).
Effective Date: October 27, 2008.Start Further Info
FOR FURTHER INFORMATION CONTACT:
Brian Smith or Gemal Brangman, AD/CVD Operations, Office 2, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-1766 or (202) 482-3773, respectively.End Further Info End Preamble Start Supplemental Information
On September 10, 2008, the petitioner submitted a letter requesting that the Department initiate and conduct an anti-circumvention inquiry, pursuant to section 781(b) of the Tariff Act of 1930, as amended (the Act), and 19 CFR 351.225(h), to determine whether imports of tissue paper from Thailand which Sunlake Décor Co., Ltd. (Sunlake)  made from jumbo rolls and cut sheets of tissue paper produced in the PRC are circumventing the antidumping duty order on tissue paper from the PRC. Specifically, the petitioner alleges that PRC-produced jumbo rolls and cut sheets of tissue paper sent to Thailand for completion or assembly into merchandise of the same class or kind as that covered by the antidumping duty order on tissue paper from the PRC are circumventing that order.
On September 19, 2008, Department officials met with the petitioner's counsel to discuss the petitioner's September 10, 2008, anti-circumvention inquiry request. See memorandum to the file entitled, “Meeting with Counsel for the Petitioner,” dated September 24, 2008.
On September 25, 2008, Department officials spoke with the foreign market researcher who provided certain information contained in the anti-circumvention inquiry request. See memorandum to the file entitled, “Telephone Conversation with Foreign Market Researcher,” dated September 29, 2008.
To date, we have received no comments from Sunlake on this matter.
Scope of the Order
The tissue paper products subject to order are cut-to-length sheets of tissue paper having a basis weight not exceeding 29 grams per square meter. Tissue paper products subject to this order may or may not be bleached, dye-colored, surface-colored, glazed, surface decorated or printed, sequined, crinkled, embossed, and/or die cut. The tissue paper subject to this order is in the form of cut-to-length sheets of tissue paper with a width equal to or greater than one-half (0.5) inch. Subject tissue paper may be flat or folded, and may be packaged by banding or wrapping with paper or film, by placing in plastic or film bags, and/or by placing in boxes for distribution and use by the ultimate consumer. Packages of tissue paper subject to this order may consist solely of tissue paper of one color and/or style, or may contain multiple colors and/or styles.
Tissue paper products subject to this order do not have specific classification numbers assigned to them under the Harmonized Tariff Schedule of the United States (HTSUS) and appear to be imported under one or more of the several different “basket” categories, including but not necessarily limited to the following subheadings: HTSUS 4802.30, HTSUS 4802.54, HTSUS 4802.61, HTSUS 4802.62, HTSUS 4802.69, HTSUS 4804.39, HTSUS 4806.40, HTSUS 4808.30, HTSUS 4808.90, HTSUS 4811.90, HTSUS 4823.90, HTSUS 9505.90.40.
Although the HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope of the investigation is dispositive.
Excluded from the scope of the order are the following tissue paper products: (1) Tissue paper products that are coated in wax, paraffin, or polymers, of a kind used in floral and food service applications; (2) tissue paper products that have been perforated, embossed, or die-cut to the shape of a toilet seat, i.e., disposable sanitary covers for toilet seats; and (3) toilet or facial tissue stock, towel or napkin stock, paper of a kind used for household or sanitary purposes, cellulose wadding, and webs of cellulose fibers (HTSUS 4803.00.20.00 and 4803.00.40.00).
Initiation of Anti-Circumvention Proceeding
Section 781(b) of the Act provides that the Department may find circumvention of an antidumping duty order when merchandise of the same class or kind subject to the order is completed or assembled in a foreign country other than the country to which the order applies. In conducting anti-circumvention inquiries under section 781(b) of the Act, the Department relies upon the following criteria: (A) Merchandise imported into the United States is of the same class or kind as any merchandise produced in a foreign country that is subject to an antidumping duty order; (B) before importation into the United States, such imported merchandise is completed or Start Printed Page 63689assembled in another foreign country from merchandise which is subject to the order or produced in the foreign country that is subject to the order; (C) the process of assembly or completion in the foreign country referred to in (B) is minor or insignificant; (D) the value of the merchandise produced in the foreign country to which the antidumping duty order applies is a significant portion of the total value of the merchandise exported to the United States; and (E) the administering authority determines that action is appropriate to prevent evasion of such order or finding. As discussed below, the petitioner presented evidence with respect to these criteria.
A. Merchandise of the Same Class or Kind
The petitioner argues that the tissue paper from Thailand, which it alleges Sunlake Décor Co., Ltd. (Sunlake) completes or assembles (e.g., such as cutting to length, possibly folding, and packaging) in Thailand before exporting it to the United States, is produced from jumbo rolls and sheets of PRC-origin tissue paper obtained from its affiliate, Zhangzhou MagicPro G.M. Arts and Crafts Co., Ltd. (ZMGM), and is physically identical to the subject merchandise cut-to-length tissue paper from the PRC. Accordingly, pursuant to section 781(b)(1)(A)(i) of the Act, the petitioner claims this tissue paper is of the same class or kind as the tissue paper produced in the PRC, which is subject to the antidumping duty order.
B. Completion of Merchandise in a Foreign Country
The petitioner states that the tissue paper that is the subject of the anti-circumvention inquiry request is made from jumbo rolls and sheets of tissue paper produced in the PRC and converted (i.e., cut-to-length, possibly folded, and packaged) into cut-to-length sheets of tissue paper in Thailand for export to the United States. The petitioner argues that unlike Sunlake's PRC affiliate (i.e., ZMGM), which has a production facility capable of producing tissue paper, Sunlake's facility in Thailand only has the ability to convert jumbo rolls and/or sheets of tissue paper into cut-to-length tissue paper and package it for exportation. The petitioner therefore concludes that, pursuant to section 781(b)(1)(B)(ii) of the Act, Sunlake's cut-to-length tissue paper is merchandise completed in another foreign country (Thailand) from merchandise that is produced in a country (the PRC) subject to an antidumping order which includes cut-to-length tissue paper in its scope.
C. Minor or Insignificant Process
The petitioner argues that for the purpose of section 781(b)(1)(C) of the Act, conversion of jumbo rolls and/or sheets of tissue paper produced in the PRC into cut-to-length tissue paper in Thailand is a “minor or insignificant process” as defined by the Act. According to the petitioner, the record of this proceeding contains substantial and detailed evidence demonstrating that converting jumbo rolls and sheets of tissue paper is a minor or insignificant process. The petitioner states that cutting and packaging tissue paper are operations that merely impart the final sheet size and form in which the product is delivered to the ultimate customer. The petitioner also states that the most fundamental aspects of the merchandise, such as the basis weight, texture, quality, and other special characteristics that may be required if the paper is intended for printing, are irrevocably established when the paper is produced. Furthermore, the petitioner claims that the types of minor assembly operations described above with respect to converting jumbo rolls and sheets of tissue paper are consistent with the information its market researcher obtained from Sunlake's facility in Thailand. See September 10, 2008, anti-circumvention inquiry request at Exhibit 6.
The petitioner states that converting the tissue involves two to three minor processes typically performed by hand in Thailand: cutting the tissue to a specific size, folding it (by hand) and packaging it for export (by hand). The petitioner contends that, based on the information obtained from its market researcher, Sunlake only has converting operations in Thailand. The petitioner cites to an affidavit in its anti-circumvention inquiry request (at Exhibit 6), wherein its market researcher reported first-hand knowledge of the operations at the Sunlake facility based on a site visit during which the market researcher observed only converting operations. Therefore, the petitioner argues, the statements made by the market researcher in its affidavit confirm that Sunlake's converting operations involve cutting, hand-folding and hand-packaging, rather than highly capital-intensive and automated activities relevant to tissue paper production, and are therefore “minor or insignificant” processes.
The petitioner argues that an analysis of the relevant statutory factors of section 781(b)(2) of the Act further supports its conclusion that the processing in Thailand is “minor or insignificant.” These factors include: (1) Level of investment in the foreign country; (2) level of research and development in the foreign country; (3) nature of the production process in the foreign country; (4) extent of production facilities in the foreign country; and (5) whether the value of the processing in the foreign country represents a small proportion of the value of the merchandise imported into the United States.
The petitioner argues that the processing in Thailand is “minor and insignificant” as the term is defined in section 781(b)(2) of the Act when compared to the complex, highly capital-intensive, skilled operations required to produce lightweight tissue paper from pulp, chemicals, and dyes. The petitioner's analysis of the statutory factors follows below.
(1) Level of Investment
The petitioner claims that available information concerning Sunlake's operations indicates that little investment has been or is being made in Thailand. The petitioner argues that Sunlake's business model indicates that Sunlake only serves as a converting operation and an export platform for Magicpro companies to the PRC (including ZMGM) and is not an integrated production operation (see page 41 of the anti-circumvention inquiry request). This assessment is consistent with the fact that Sunlake rents but does not own its own facilities, and that its converting operations are much less capital-intensive and more susceptible to relocation than papermaking operations. The petitioner further argues that ZMGM would have no desire to set up an operation in Thailand that would compete with its own production operations. The petitioner concludes that the level of investment in the Thailand processing facility is low.
(2) Level of Research and Development
The petitioner maintains that the evidence reasonably available indicates that no research and development (R&D) is taking place in Thailand. The petitioner states that because Sunlake is affiliated with ZMGM, it is reasonable to presume that any R&D efforts would originate at ZMGM in the PRC. Furthermore, the petitioner states that tissue paper production is a mature industry and any technical developments are refinements rather than new technologies. Converting operations also reflect mature technologies, according to the petitioner, and the Thai converting operations involve hand-folding and packaging, which are less automated Start Printed Page 63690and less R&D-intensive activities than those found in the United States. See September 10, 2008, anti-circumvention inquiry request at page 43.
(3) Nature of the Production Process in Thailand
The petitioner argues that the data obtained from its market researcher indicate that Sunlake's operations in Thailand are limited to PRC-origin jumbo rolls and sheets being cut to size (if necessary) and packed by hand prior to export. They involve unskilled manual labor in contrast to skilled labor required for papermaking. Therefore, the petitioner contends that Sunlake's “production process” reflects operations that are designed to assemble or complete the merchandise in a minor or insignificant fashion. See September 10, 2008, anti-circumvention inquiry request at page 44. The petitioner notes that all of the operations observed and documented by its market researcher are designed and intended to convert (cut and/or package) the tissue paper imported into Thailand without altering its fundamental and critical characteristics of basis weight, quality, and texture that are established during the papermaking stage of production.
(4) Extent of Production in Thailand
The petitioner states that Sunlake's operations are housed in rented facilities, a fact which suggests a lower level of investment than that which would be required by the capital-intensive nature of papermaking operations. The petitioner also states that Sunlake does not have papermaking operations. According to the petitioner, the capital-intensive nature of papermaking operations requires that the necessary machinery be permanently placed and operated, while converting and packaging operations can be temporarily housed and are easily movable. The petitioner claims that this information supports a determination that Sunlake was established as a means for the Magicpro companies in the PRC (including ZMGM) to continue using their tissue paper production capacity and doing business in the U.S. market without paying duties.
(5) Value of Thailand Processing Compared to Tissue Paper Imported Into the United States
The petitioner states that it does not have access to information concerning the cost of the jumbo rolls and sheets of tissue paper exported from the PRC to Sunlake, or the costs associated with the converting operations performed in Thailand; however, it contends that data from the record of the anti-circumvention inquiry regarding tissue paper exports from Vietnam support a determination that the value of processing performed in Thailand represents a small portion of the value of the merchandise imported into the United States. Specifically, in the Vietnam anti-circumvention inquiry, the Department determined that the same type of conversion processes were minor or insignificant for purposes of the statute, and that inclusion of the resulting tissue paper in the order was appropriate to avoid circumvention of the order. See Certain Tissue Paper Products From the People's Republic of China: Affirmative Preliminary Determination of Circumvention of the Antidumping Duty Order and Extension of Final Determination, 73 FR 21580 (April 22, 2008) (which was upheld in Certain Tissue Paper Products From the People's Republic of China: Affirmative Final Determination of Circumvention of the Antidumping Duty Order, 73 FR 57591 (October 3, 2008)). In fact, the petitioner notes that in the anti-circumvention inquiry involving Vietnam, the activities performed by the Vietnamese entity at issue included more involved forms of processing (e.g., dip-dying) which would add greater amounts of value than merely converting jumbo rolls and, particularly, sheets. In contrast, the petitioner contends that Sunlake is importing the jumbo rolls and sheets and is only converting them without additional processing (such as dip-dying).
D. Value of Merchandise Produced in PRC
The petitioner argues that the evidence as noted in its anti-circumvention inquiry request clearly supports its position that the value of the tissue paper jumbo rolls and sheets produced in the PRC and sent to Sunlake represents a significant portion of the total value of the merchandise exported to the United States, as measured by the prices at which jumbo rolls and cut tissue paper sheets are produced and/or sold at market value. The petitioner notes that this conclusion is particularly supported by the fact that Sunlake's activities are limited to cutting and folding (if necessary), packing, and shipping the finished tissue paper product.
E. Factors To Consider in Determining Whether Action Is Necessary
The petitioner argues that additional factors must be considered in the Department's decision whether to issue a finding of circumvention regarding importation of Thai tissue paper. These factors are discussed below.
Pattern of Trade
The petitioner states that section 781(b)(3) of the Act directs the Department to take into account patterns of trade when making a decision in an anti-circumvention case. The petitioner argues that two months after the antidumping duty order was issued, substantial volumes of certain tissue paper products began appearing as U.S. imports from Thailand through Sunlake, and have continued since then. The petitioner bases this claim on an analysis of publicly available U.S. import statistics and company-specific information from the Port Import Export Reporting Service (PIERS). See September 10, 2008, anti-circumvention inquiry request at Exhibits 1 and 2.
The petitioner states that section 781(b)(3) of the Act directs the Department to take into account whether the manufacturer or exporter of the merchandise is affiliated with the person who uses the merchandise to assemble or complete in the foreign country the merchandise that is subsequently imported into the United States when making a decision in an anti-circumvention case. The petitioner contends that Sunlake is affiliated with multiple Magicpro companies worldwide, including ZMGM, which is known to be a tissue paper producer in the PRC. See September 10, 2008, anti-circumvention inquiry request at pages 51-52 and Exhibit 6. The petitioner argues that the affiliation, the timing of Sunlake's establishment and the nature of the company's operation (i.e., importing rolls and/or sheets to be converted and then exporting them) suggest a clear intention to shift completion of merchandise under order from the PRC to Thailand. See September 10, 2008, anti-circumvention request at page 52.
Subsequent Import Volume
The petitioner states that section 781(b)(3) of the Act directs the Department to take into account whether imports into the foreign country of the merchandise have increased after the initiation of the investigation which resulted in the issuance of an order when making a decision in an anti-circumvention case. The petitioner claims it does not have access to precise data concerning trade flows of jumbo rolls and sheets of tissue paper between Magicpro companies in the PRC and Sunlake in Thailand; however, it maintains that import data Start Printed Page 63691from World Trade Atlas show that the volume of tissue paper shipments from the PRC to Thailand increased significantly after the original investigation was initiated and the antidumping duty order was issued in this proceeding. In addition, the petitioner notes that it is impossible that Sunlake would have received jumbo rolls before May 17, 2005, because the company did not exist before then. See September 10, 2008, anti-circumvention inquiry request at pages 6 and 53.
The petitioner also points out that the evidence concerning Thailand's prior lack of exports of tissue paper to the United States, coupled with the emergence of large export volumes of tissue paper from Thailand starting four months after the petition was filed, provides a reasonable basis for inferring that jumbo roll and large tissue sheet imports into Thailand from the PRC increased after the initiation of the original investigation in this proceeding. See September 10, 2008, anti-circumvention inquiry request at page 53.
Based on our analysis of the petitioner's September 10, 2008, anti-circumvention inquiry request, the Department determines that a formal anti-circumvention inquiry is warranted. In accordance with 19 CFR 351.225(e), if the Department finds that the issue of whether a product is included within the scope of an order cannot be determined based solely upon the request and the descriptions of the merchandise, the Department will notify by mail all parties on the Department's scope service list of the initiation of a scope inquiry, including an anti-circumvention inquiry. In addition, in accordance with 19 CFR 351.225(f)(1), a notice of the initiation of an anti-circumvention inquiry issued under 19 CFR 351.225(e) will include a description of the product that is the subject of the anti-circumvention inquiry—in this case, cut-to-length tissue paper that contains the characteristics as provided in the scope of the order—and an explanation of the reasons for the Department's decision to initiate an anti-circumvention inquiry, as provided below.
With regard to whether the merchandise from Thailand is of the same class or kind as the merchandise produced in the PRC, the petitioner has presented information indicating that the merchandise being imported from Thailand is of the same class or kind as the tissue paper produced in the PRC, which is subject to the antidumping duty order. The merchandise from Thailand shares physical characteristics with the merchandise covered by the antidumping duty order.
With regard to completion of merchandise in a foreign country, the petitioner has also presented information that the tissue paper from Thailand is being processed in Thailand using PRC jumbo rolls and/or sheets of tissue paper as the input.
With regard to whether the conversion of PRC jumbo rolls and/or sheets of tissue paper into cut-to-length tissue paper from Thailand is a “minor or insignificant process,” the petitioner addressed the relevant statutory factors used to determine whether the processing of jumbo rolls and sheets of tissue paper is minor or insignificant with the best information available to the petitioner at the time of the request. The petitioner relied on information obtained from its market researcher for this purpose. See September 10, 2008, anti-circumvention inquiry request at Exhibit 6.
Having established through direct contact the reliability of the data presented by the market researcher in Exhibit 6, we find that the information presented by the petitioner supports its request to initiate an anti-circumvention inquiry. In particular, the petitioner provides evidence for each of the criteria provided in the statute, including the following: (1) Sunlake's corporate and financial profile suggests little investment has been made in Sunlake; (2) because ZMGM has a fully integrated production facility and is affiliated with Sunlake, it is reasonable to infer that R&D takes place in the PRC; (3) cutting, folding and packaging (i.e., the converting process) do not alter the fundamental characteristics of the tissue paper; (4) Sunlake's rented facilities suggest a lower investment level than that required by the capital-intensive nature of the papermaking process; and (5) Sunlake's limited operations suggest that converting tissue paper adds little value to the merchandise imported into the United States.
With respect to the value of the merchandise produced in the PRC, the petitioner relied on the information and arguments in the “minor or insignificant process” portion of its anti-circumvention request to indicate that the value of jumbo rolls and sheets of tissue paper is significant relative to the total value of finished merchandise exported to the United States. We find that the information adequately meets the requirements of this factor, as discussed above.
Finally, the petitioner argued that the Department should also consider the pattern of trade, affiliation, and subsequent import volume as factors in determining whether to initiate the anti-circumvention inquiry. The import information submitted by the petitioner indicates that U.S. imports of tissue paper from Thailand are rising significantly, and that the volume of tissue paper shipments from the PRC to Thailand has increased significantly. In addition, the petitioner provides information suggesting that Sunlake's affiliation with a known producer of the subject merchandise in the PRC, the timing of Sunlake's establishment, and the nature of Sunlake's operations reflect an intention to shift completion of merchandise subject to the order from the PRC to Thailand.
Accordingly, we are initiating a formal anti-circumvention inquiry concerning the antidumping duty order on certain tissue paper products from the PRC, pursuant to section 781(b) of the Act. In accordance with 19 CFR 351.225(l)(2), if the Department issues a preliminary affirmative determination, we will then instruct U.S. Customs and Border Protection to suspend liquidation and require a cash deposit of estimated duties, at the applicable rate, for each unliquidated entry of the merchandise at issue, entered or withdrawn from warehouse for consumption on or after the date of initiation of the inquiry.
The Department is focusing its analysis of the significance of the production process in Thailand on the single processor identified by the petitioner, namely Sunlake, in its September 10, 2008, anti-circumvention inquiry request and about which sufficient information to initiate an anti-circumvention inquiry has been provided. If the Department receives a formal request from an interested party regarding potential circumvention by other Thai companies involved in processing PRC jumbo rolls and/or sheets for export to the United States within sufficient time, we will consider conducting the inquiries concurrently.
The Department will, following consultation with interested parties, establish a schedule for questionnaires and comments on the issues. The Department intends to issue its final determination within 300 days of the date of publication of this initiation consistent with the language of section 781(f) of the Act.
This notice is published in accordance with 19 CFR 351.225(f).Start Signature
Dated: October 21, 2008.
Stephen J. Claeys,
Acting Assistant Secretary for Import Administration.
1. Sunlake is a company located in Thailand.Back to Citation
[FR Doc. E8-25584 Filed 10-24-08; 8:45 am]
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